The FCC unveiled a long-awaited rulemaking on leased cable access (CD July 14 p1), combining it with an inquiry on procedures to resolve showdowns between cable operators and programmers. The leased access rulemaking solicits input on a wide array of questions on the effectiveness of the system for small companies to buy time for showing programming on a local cable channel.

The House and Senate Judiciary Committees likely will hold hearings on whether radio stations should pay royalties to musicians, MusicFirst Coalition Exec. Dir. Mark Kadesh told us. The Coalition, unveiled Thurs., wants to force broadcasters to pay performers royalties. Radio stations now only pay royalties to composers -- an arrangement unfair to artists who don’t get paid for use of their works, according to Kadesh and other Coalition members. Satellite radio and webcasters do pay such fees, mandated in most other countries, Coalition members said. Kadesh has no media industry experience to help him in his new job, but his decade-plus of Hill experience and working with experts will help persuade legislators a new law is needed, he said. NAB declared it will fight efforts by Coalition member RIAA to “tax… local radio stations.” NAB said “Congress has long recognized that radio airplay of music generates millions of dollars in revenue for record labels and artists.” RIAA Chmn. Mitch Bainwol told us that NAB’s characterization of artist royalties as a tax is “silly” because “we are the only country, we are the only platform… that isn’t compensated for copyright” use. The U.S. is “an exception that sticks out like a sore thumb,” he said. Musicians and other speakers on a conference call about the Coalition offered few specifics about how they'll persuade legislators to rewrite copyright law, besides saying it’s the fair thing to do.

The ranks of Wall St. analysts covering media companies shrank by 2 in as many months as firms pared research because it’s less profitable than other investment businesses. In early May, longtime cable analyst Douglas Shapiro left Banc of America Securities. Last week, Prudential Financial Senior Vp Katherine Styponias said she left after a decade because the company decided to stop providing stock research to investors. Styponias had covered cable and satellite companies; she and Shapiro declined to say where they next will work. Other analysts have told us that dwindling of publicly traded media companies has made stock research tougher by reducing investor demand for their work. Changes at securities firms have prompted other media analysts to switch companies while continuing to follow the industry. Longtime A.G. Edwards broadcast analyst Michael Kupinski left last month to work at Noble Financial, shortly before A.G. Edwards agreed to be sold. In recent years Cox, Insight and Univision have gone private, with Cablevision, Clear Channel and Tribune set to follow.

More cable operators are seeking to avoid CableCARD rules on grounds that they face financial constraints similar to those cited by Charter, given a waiver in May (CD May 7 p1). Great Plains Cable is the latest operator to ask to escape a ban on combining set-top box navigation and security features, our review of filings in FCC docket 97-80 shows. The Great Plains filing is notable for the date of its receipt by the FCC -- May 31, a month before the integration ban takes effect -- and for citing Charter’s successful waiver argument. James Cable was the first cable operator to justify its claim for an exemption by referencing the same hurdles as Charter and 2 other companies getting favorable Media Bureau action in early May orders (CD May 21 p10).

Mon.’s court remand of FCC indecency policy has created scant buzz - at least outside D.C., gauged by sales at a website selling anti-FCC T-shirts and coffee mugs and talk among TV producers. Creative types aren’t atwitter over the 2nd U.S. Appeals Court, N.Y., ruling (CD June 5 p1) because it doesn’t affect viewer taste, Rene Balcer, exec. producer of NBC’s Law & Order series, told us. Producers “don’t see that it will change anything,” he said: “We don’t respond to the FCC. We respond to the marketplace.” The ruling didn’t send FCCFu.com sales spiking, said Paul Fey, whose company, World Wide Wadio, runs the site. Since the FCC issuance last year of a record tally of indecency fines, the site has been selling products mocking the agency. Among communications lawyers, chatter is high on what the FCC will do to resolve the court remand.

The FCC has many options for helping minorities and women buy and run radio stations, said Comr. Copps. He spoke during release of Free Press data showing minorities and women own 1,441 full-power radio stations - 14% of the U.S. total. The FCC can widen that slice by licensing more low- power FM stations and extending agency construction deadlines for minority and female buyers, Copps told us: “I would like to see this Commission come up with something that will get us moving on low power.” Free Press Research Dir. Derek Turner called technologies such as low-power radio crucial to diversity.

An appeals court said the FCC can’t find broadcasts indecent if they include a single curse because in 2004 the agency changed enforcement policy without giving sufficient reason for doing so or analyzing the change. U.S. Appeals Court, N.Y., remanded the whole “fleeting expletive” policy to the FCC, vacating 2 orders finding Fox’s Billboard 2002 and 2003 shows indecent. In a ruling written by Judge Rosemary Pooler, she and Peter Hall said the FCC violated the Administrative Procedure Act (APA) in finding U-2 singer Bono’s utterance of “fucking” in 2003 on NBC’s Golden Globe Awards show indecent. Judge Pierre Leval dissented, saying the Commission gave the industry plenty of notice it was changing enforcement and didn’t violate administrative procedure.

XIT Telecom is the latest company seeking an extension of a July FCC set-top box navigation and security integration ban to Dec. 31. The company wants time to finish digital upgrades at 2 rural cable systems it recently acquired. The upgrades are lagging because of “unexpected transport and integration issues,” said XIT, which has 3,340 cable subscribers at the systems. XIT has Motorola DCT-700 boxes it planned to distribute to customers before the integration ban starts, it said: “If the FCC does not grant the instant waiver request, XIT’s resources devoted to upgrading these small rural systems will have to be diverted to the purchase of replacement set-top boxes that are 2 to 3 times the cost of the boxes XIT” already bought. The company deserves an extension because the FCC recently exempted Charter, GCI Cable and Millennium Telecom, XIT said (CD May 5 p1). Those exemptions, announced May 4, likely will spur a slew of small cable operators to file requests after sitting back while larger companies made requests, said cable lawyers and an industry executive. “You will see both additional waivers and updates to existing waivers” refer to the recent FCC exemptions, said Sunflower Broadband Gen. Mgr. Patrick Knorr. His company is seeking a waiver.

Franchise fees on cable broadband service aren’t banned by the Telecom Act, the Internet Tax Freedom Act or the Supreme Court’s 2005 Brand X decision (CD June 28/05 p1), ruled a 3-judge Ill. Court of Appeal panel. Chicago can collect 5% of cable modem revenue from companies including Comcast, RCN and WideOpenWest as a city franchise fee capped at that level, Judge Calvin Campbell wrote in a ruling last week. It reversed a ruling by the Circuit Court of Cook County, Chicago, that had found the city couldn’t charge the fee. Judges Patrick Quinn and Scott Neville concurred in Chicago v. Comcast, finding the city’s franchise deal with the 3 cable operators lawfully included a tax on broadband service. Campbell wrote that the Brand X ruling allowing the FCC to treat cable broadband as a data service didn’t deal with whether cable modem service comes under franchise fees. Brand X simply upheld an FCC decision to treat cable modem as a Title 1 service, Campbell wrote: “No court ruled on the interplay between the FCC declaratory ruling and the Communications Act and entered a definitive order resolving the applicability of franchise fees to cable modem service. This court does not stand in the shoes of our federal government and cannot amend a federal act. We are, however, in a position to apply our own state law to a valid contractual agreement.” The Ill. Constitution empowered the city to enforce its franchise agreement, which Sect. 542(b) of the Communications Act doesn’t preempt, the appeal court ruled: “The 5% fee is neither a toll nor a tax, but a franchise fee agreed to be paid by defendants in a valid contract in exchange for the use of the city’s right of way.” Since the franchise fee isn’t a tax, it’s not barred by the Internet Tax Freedom Act, either, the court said. The 3 cable operators violated their video franchise agreements by refusing since April 2002 to pay the 5% cable modem service fee, it said. The pay-TV providers said they couldn’t be charged municipal fees for broadband because the FCC said cable broadband isn’t a cable service. The defendants also said previous rulings by federal appeals courts found fees like the cable modem franchise charge were impermissible. RCN signaled it’s likely to appeal. “We are still reviewing the decision,” Senior Vp Richard Ramlall told us, “but are certainly likely to seek review of a decision that so completely eviscerates the federal law and the FCC decisions that have implemented that federal law.” A former FCC lawyer agreed with RCN. “The Illinois state court bends over backwards to ignore what seems to be a pretty clear congressional intent that localities not be allowed to impose franchise fees on noncable services such as Internet access,” Free State Foundation Pres. Randolph May said: “Its position is not likely to be ultimately sustained.” Comcast will appeal the ruling, which a spokeswoman termed “contrary to the opinions of 4 federal district courts that have previously ruled on nearly the identical question before the Illinois Court.” The ruling also goes against FCC rulemakings, including the March franchise order, she said. Officials at WideOpenWest didn’t immediately comment.

AT&T ended an IPTV dispute with Milwaukee, for now anyway, with a deal for the Bell to sell U-verse service there. A 3-year “interim operating agreement” requires AT&T to pay a 5% video franchise fee and 2% public access channel tax, said Vincent Moschella, deputy city attorney. The deal was approved April 17 by the city’s legislative body, the common council, Moshella told us. He said Milwaukee agreed to put a lawsuit against AT&T on hold pending the outcome on a statewide franchise bill (SB 107) set for Senate debate (CD May 15 p3). The legislation, passed by the House, would let cable operators and new video entrants including AT&T apply for statewide franchises. It doesn’t make financial sense to pursue the lawsuit -- filed last year in the U.S. Dist. Court, Milwaukee -- while legislators consider a law that would take away municipalities’ right to set video contracts, he said: “We just told the judge we'd all like to wait.” AT&T’s deal with the city has a provision letting either side opt out of if it’s made moot by changes in state or federal law or a pending court appeal of FCC franchising rules, he said (See separate report in this issue.) An AT&T official confirmed the city has an agreement with Milwaukee, but couldn’t provide further details on the deal right away.